You need to know that working solo comes with a fair amount of tax and legal ramifications, from business licenses and liability insurance to client contracts and expense tracking. If you have no proficient advisors to help you with this journey “The learning curve can been steep,” says many entrepreneurs.

If you, too, find yourself working as an independent professional after a lengthy stretch as someone else’s employee, consider this your tax and legal primer. The sooner you tackle these items, the smoother your transition to self-employed professional will be.

Sole proprietor or LLC?

Everyone from your clients to the IRS will want to know whether you’re operating a sole proprietorship, limited liability company (LLC) or another type of business entity. So choosing a business structure should be at the top of your list. Nolo.com offers useful definitions and guidance on the various options.

Many independent workers opt for sole proprietorship. There’s no paperwork required; all you need to do is start working. “That’s the cheapest and easiest way to own a business,”, But if you’re worried about being personally liable for business debts that arise, it makes sense to form an LLC. Doing so entails filling out a little paperwork and paying a nominal fee to an online service like LegalZoom, or a bit more if you enlist an attorney or an accountant to help.

Business name and license

If you plan to use a company name other than your own, you may need to register what is often referred to as a fictitious business name, or “doing business as” (DBA), depending on your state or county’s requirements. No matter what your business name, you may need city and state business licenses, depending on the rules where you live. Don’t wait to apply for these licenses, which often have an annual fee and may require you to file a city and state tax return, even during your first business year. “If you don’t have a license and the government finds out about it, they can fine you

Liability insurance

An LLC won’t necessarily safeguard your personal assets if you’re sued by a client or business associate, Fishman warns. That’s why it’s wise to buy professional liability insurance. And some clients require this coverage. To purchase a policy, contact a broker who specializes in professional insurance, or check with your industry association, as many offer business insurance deals.

Estimated tax payments

When you work as an independent professional, most clients won’t take taxes out of your payments. Instead, you’ll have to pay taxes directly to the IRS, in quarterly estimated tax payments due April 15, June 15, Sept. 15 and Jan. 15 of the following year. We recommend hiring an account (or CPA) to walk you through the process of filing your quarterly estimated taxes, and for that matter, your annual tax return, at least for your first year in business. Same goes for any city or state tax returns you must file.

Self-employment tax

Working for yourself also means paying a federal self-employment tax, which is a fancy way of saying that you now pay both the employer and employee portion of Social Security and Medicare taxes. Paying the employer contribution means forfeiting an extra 7.65 percent of your annual income. To make up the difference, you have to factor federal, state and local taxes into the client rates you set.

Tax deductions

The upside to paying self-employment taxes is that you can deduct all sorts of business expenses on your annual tax return. This includes your mileage, home office, computer, software, web hosting, part of your cellphone bill, health insurance premiums, professional dues and education, networking events, business travel and client dinners. “All this will help reduce the amount of taxes you owe,” Working with a tax preparer or tax software helps ensure you’ve taken advantage of all allowable deductions and don’t claim anything you shouldn’t.

Record keeping

It’s not enough to save bank and credit card statements. You have to save business receipts, too. “If you get audited, you have to prove your expenses,”. We suggests using a software program such as QuickBooks, or even Excel, to track deductibles. Or enters all your expenses into a template provided by your accountant and storing paper receipts by category in an accordion binder can speed up data entry.

Business bank account

If you become an LLC, you’ll need to open a business bank account. But business checking and savings accounts can make life easier for sole proprietors, too. Besides keeping your professional finances separate from your personal ones, a business account is a great place to set aside income for your quarterly tax payments. Plus, having one credit card you use for business can make it easier to track your expenses.

Retirement fund

One of the downsides of working for yourself is giving up 401(k) employer matching. But that’s no excuse to stop saving for retirement. Setting up automatic monthly deposits from your business account to your retirement fund is the easiest way to do it. Besides safeguarding your future, it helps reduce your federal tax bill each year. And “You’re putting away money pre-tax”

For example, a Simplified Employee Pension, or SEP-IRA, which you can open with an investment company, bank or other financial institution, lets you contribute as much as 25 percent of your net self-employment earnings per year, up to $53,000. The IRS offers a handy guide for this and other types of retirement funds for the self-employed; your accountant can offer further guidance.

Contracts

Signing a document detailing the deadlines, terms of payment and other project particulars can help protect you and your clients against misunderstandings. Many clients provide a standard contract to their independent workers. Don’t sign blindly. Read carefully to make sure you approve all the details, and negotiate as needed. (If possible show it to your attorney as long as they don’t charge you for the review)

Provide your own contract if you can, be it a formal document or an email outlining the project details. “You always do better if you use your own contract,” For help creating or deciphering contracts, consult an attorney who works with independent professionals or your industry association. You can also find contract templates online through sites like Nolo.com.

Regardless of how you decide to handle these different tax and legal issues as an independent worker or small business owner, it’s important to take time to think them through. Once they’re taken care of, you can focus on the fun part — building your business.